On-chain Weekly April 29th

  • Long-term Outlook - Sentiment: Bullish - The long-term on-chain outlook remains bullish during difficult times as many investors continue to remain “risk-off” in the short-term. The Bitcoin Network added two million new holders in 2022 and roughly 17,000 non-zero BTC wallet holders joined the protocol each day since the start of the year. BTC withdrawals from exchanges peaked this week, contributing to a positive supply-side narrative. Long-term holders (LTH) add more BTC to their holdings this week, albeit at relatively low levels compared to other accumulation cycles.

  • Mid-term Outlook - Sentiment: Neutral - The BTC market has been stuck in neutral for the mid-term with the Adjusted Spent Output Profit Ratio (aSOPR) metric trading sideways for the greater part of the last five months. Increasing geopolitical tension, inflation, rising interest rates, and high correlation to a currently struggling equities market have muted interest in BTC - the effects being visible even on the LTH-SOPR chart.

  • Short-term Outlook - Sentiment: Neutral - BTC Derivatives markets remain relatively quiet, evidenced by lower Futures Open Interest and funding rates in aggregate over the last quarter. This decline in derivatives markets started late last year and has continued for the past 150 days. Stablecoin balance on exchanges has exploded year-to-date, providing plenty of “dry powder” to ignite the next bullish cycle.

Long-term Outlook - Sentiment: Bullish

Two Million non-zero addresses go active in 2022

During the first four months of 2022, the Bitcoin Network saw around two million unique BTC wallet addresses add BTC to their balances. This is at a rate of nearly 17,000 non-zero addresses per day. This growth has been steady over the last decade, culminating with the current total of addresses within this metric totalling just below 42 million holders. A growing number of addresses holding BTC confirms more adoption in the protocol and actual usage. Combining these narratives with the potential for a future unexpected spike in demand, also called a supply shock, paints a positive picture for the supply side of the BTC market. Prices could surge quickly with renewed demand considering the strong supply structure present in Bitcoin at this time.

Slow but positive net accumulation

Long-term holders (LTH) of BTC, in this context, are defined by Glassnode as wallet addresses that have been accumulating Bitcoin for greater than 155 days. LTHs are typically viewed as being patient, more experienced, smart-money investors. Long-term holders have been observed on-chain to accumulate inexpensive BTC during bearish trends, and distribute into bull market strength.

The current market has been tricky for all BTC cohorts, and the lower trading volumes by LTH on either side of the trade can be attributed to lower interest and conviction. Obviously, macroeconomic headwinds are creating a great deal of uncertainty in many markets. It should also be noted that the global cryptocurrency landscape has changed exponentially in regards to the number of non-BTC projects and investment opportunities available since the Bitcoin Network was launched on 9 January 2009. There are far more new and interesting projects that could be catching the eyes of new retail investors and others who may, in the past, have invested in BTC.

Suffice it to say that even while there are some negative factors to consider, the fact that LTHs continue to add more Bitcoin to their wallet at current prices is fundamentally bullish for the long-term fundamental health of the Bitcoin network.

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Could we see a BTC supply shock in 2022?

As mentioned earlier in this section, a supply shock is usually triggered by an unforeseen event that changes the supply dynamics of a product or commodity resulting in an unforeseen change in price. For example, last year the Chinese government unexpectedly banned all mining activities within its borders, creating a supply shock in BTC ASIC miners. Within days, there were thousands of mining machines made available on commercial sites like Alibaba. This quickly drove the price of these machines down far below their previous value. Simultaneously, the ban triggered a huge sell-off in BTC markets, causing markets to struggle and a 50% correction in the price of BTC, visualized below in the Illiquid Supply Change metric.

Almost 15 million BTC are considered illiquid

Glassnode generally defines illiquid BTC as coins held in wallets with little to no history of spending. Illiquid BTC could also be BTC that was lost, held in wallets with no access, sequestered due to legal action as well as a multitude of other reasons. The point is that some illiquid BTC is not just in cold storage or self-custody wallets. Many of these coins may never be able to be bought or sold by anyone and are lost forever.

With this in mind, consider that the total circulating supply of BTC is around 19m BTC, with approximately 1000 coins being mined and added to the supply daily (at the time of writing). We can break that 19m BTC into three groups - illiquid supply, liquid supply, and highly liquid supply. Liquid and highly liquid BTC make up about 4.5m of BTC’s supply or about 24%. That leaves roughly 14.5m, or 76% of Bitcoin’s total supply classified as illiquid as depicted in the chart below.

A BTC supply shock is forming

The first quarter of 2022 is marked by a notable increase in BTC becoming illiquid. This trend has been steadily increasing and adds to the bullish longer-term narrative for the Bitcoin Network in the upcoming months, as fewer and fewer BTC become available to be bought on exchanges.

Mid-term Outlook - Sentiment: Neutral

BTC and other markets have been battered over recent months by constant bad news, mitigated now and then by a positive note that generates some short-term interest. All things considered, Bitcoin has performed relatively well in the mid-term, even with notable potholes in the road such as the conflict in Ukraine, renewed Fed hawkishness, inflation, supply chain issues, and the recent veiled threats of nuclear war.

Low-intensity reading in aSOPR signals market choppiness

At the time of writing, aSOPR has been stuck in a neutral or sideways trading pattern since November 2021. This metric is especially useful for analyzing market sentiment, as it is fairly easy to read. Currently, we can see aSOPR clearly struggling to remain below or above the value of one for any significant period of time. This choppiness can be attributed to lower interest and the overall intensity of trading in the market. Looking at past markets, the range of values in the current cycle is clearly compressed into a tighter range. Fewer and smaller profits and losses are being taken than in past markets, signalling a clearly neutral sentiment for the mid-term.

Understanding SOPR

The Spent Output Profit Ratio (SOPR) metric is useful for understanding the overall market sentiment regarding profits and losses in the mid-term. There are five key ideas to understand when reading this model.

  1. When SOPR is greater than one (>1), coins are transacting at a profit.
  2. When SOPR is less than (<1), coins are transacting at a loss.
  3. “SOPR reset” (SOPR=1) can signal the start or end of a mid-term cycle.
  4. aSOPR is a more advanced metric that filters transactions to remove any “in-house” activity. aSOPR is an effort to provide a better market signal compared to its raw-data counterpart.
  5. aSOPR/SOPR can be further segmented by LTH/STH cohorts

Long-term holder SOPR hits low not seen since COVID

In 2021, long-term holders enjoyed a golden period of profits. Especially if they were holding or selling BTC purchased during the COVID crash or before. The LTH dynamic is constantly changing as shorter-term holders graduate into long-term holders after the 155-day mark, according to Glassnode.

Last spring, all long-term BTC holders were in profit. They sold into the willing hands of the WSB/retail crowd and institutional capital – just as FOMO (fear of missing out) reached ATH along with the price of BTC at +$60,000.

This year, there is a relatively large cohort of long-term holders who are holding coins they bought when BTC was at its last two ATH. Times are quite different than during the same time last year when the BTC market was seemingly strapped to a rocket headed for Mars. Now, when members of this cohort sell at a loss, it can drive LTH-SOPR down below one for periods of time. With many crypto-enthusiasts and traders opting to take extremely long positions, a.k.a. HODLing, as their strategy for trading BTC; there have been very few drops below one in the past year. The fact that there have not been any large spikes and gaps in LTH-SOPR below the value of one for nearly two years indicates strong conviction in BTC by nearly all LTHs. This conviction, combined with other on-chain indicators, would paint a bullish mid-term outlook, however, considering the mitigating headwinds present a more cautious neutral position.

Short-term Outlook, Sentiment: Neutral

While uncertainty is definitely a factor in the current market, Bitcoin has fundamentally remained resilient and has remained relatively stable in the $38-43,000 range. Spot demand has been weak during the first quarter of 2022, with much of the price action in the BTC market being driven by futures markets with relatively low volumes.

Currently, Futures Open Interest levels are relatively low at exchanges, suggesting a relatively calm market with plenty of room to grow if and when investor demand increases in the short term.

Stablecoins offer stability for risk-off crypto markets

Cryptocurrency coins that are pegged to the dollar - so-called “stablecoins” - have been growing exponentially over the last two years. Stablecoins offer low volatility for traders and are attractive “placeholders” for value before entering or when exiting trades. It should be noted that stablecoins are currently traded at volumes higher than any other type of cryptocurrency, denoting their popularity and usefulness.

Many traders use these tokens as a primary vehicle for opening and exiting Bitcoin positions on exchanges. Stablecoins play a critical role in the supply-and-demand dynamics of various global cryptocurrency markets, which in turn can directly influence the price of BTC. Stablecoins live natively on the blockchain, allowing on-chain analysts to observe the supply and demand dynamics between BTC and USD.

Over 25bn in stablecoin ready to be spent

With over $25bn in stablecoin sitting on exchanges waiting to be spent, a recovery could potentially materialize quickly in BTC or other cryptocurrency markets. While billions in value available in stablecoin can be viewed as bullish for the entire crypto market, it does not mean that this value will flow directly back into BTC when the market goes risk-on again.

What is positive is that investors are choosing to store their value in stablecoin during risk-off environments instead of converting that value into fiat currency. For the BTC market, it is a neutral indicator that could be interpreted as investors harboring their investment capital in a safe haven, and in line with the current neutral short-term outlook.


Recent news of inflation and interest rates have largely been digested by markets, reducing their impact on the price of BTC. The geopolitical landscape continues to create black swan events that are difficult to price into markets – creating unclear effects. What is clear is that Bitcoin remains tightly correlated with equities markets and until a decoupling occurs, BTC will be subject to the headwinds and tailwinds of the larger financial markets.

Even while the short-term perspective is uncertain, the long-term fundamentals of the BTC protocol remain strong, with consistent demand evidenced by a two-year trend of BTC outflows from exchanges into self-custody wallets. In addition to the steady demand, it is becoming increasingly obvious that users who store their own Bitcoin in self-custody or cold storage are more experienced, more confident investors, contributing to a narrative that illustrates greater sophistication and maturity in regards to the Bitcoin protocol.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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